A Quick Look At BHP Billiton’s EPS Forecasts

Published in Company Comment on 14 November 2012

How might earnings at BHP Billiton (LSE: BLT) change in the years to come?

It's always worth keeping an eye on the earnings forecasts for your favourite companies, especially if you use forward P/E ratios to gauge when to buy and sell your shares.

You never know, if City brokers have been revising their projections of late, your investments may not be as cheap -- or expensive -- as you think!

Today I'm looking at the earnings per share (EPS) forecasts for BHP Billiton (LSE: BLT) (NYSE: BBL.US), the FTSE 100 (UKX) diversified miner. All my figures are courtesy of S&P Capital IQ.

The consensus for 2013 is for earnings per share of 170p, which puts the 1,926p shares on a forward P/E of 11.

The estimates suggest earnings may rise to 196p per share for 2014 and climb to 202p for 2015. Earnings per share may then rise further to 206p for 2016 before falling back to 198p in 2017, at least according to City analysts.

The data from S&P Capital IQ also indicates BHP Billiton's revenues may rise from £43 billion in 2013 to £48 billion the following year before climbing to £52 billion the year after.

Apart from rising revenues, the forecasts for BHP aren't great -- profits are essentially predicted to go nowhere between 2014 and 2016. But then again, that P/E of around 11 looks like the market is already expecting earnings won't advance anytime soon.

Whether these projections make BHP Billiton a buy, a hold or a sell is of course up to you. To put the company's multiple into perspective, the FTSE 100 at 5,755 trades on a P/E of 11.4.

As well as BHP Billiton, there are plenty of great FTSE stocks out there. Some of them are listed in our special in-depth Motley Fool report "Eight Top Blue Chips Held By Britain's Super Investor".

The report is completely free and shows where buy-and-hold maestro Neil Woodford believes the best FTSE shares are to be found today. You can download the report here.

> David does not own shares in BHP Billiton.

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F958B 14 Nov 2012 , 4:57pm

BLT are just a hold, although if I wanted a resource company in my portfolio I'd look at BLT and RDSB due to their demonstrated greater reslience. This greater resilience does cause a more sluggish share price - less upside potential but also less downside potential compared to other commodity companies. Capital-gains seekers should look at the higher-Beta resource companies - but remember that high Beta cuts both ways.

BLT have admitted that they expect industrial commodity prices to see a long, slow, slide. Other miners have implied similar scenarios.

China and its demand for industrial commodities has been decelerating at a rapid rate - I'm not at all surprised, given that the sluggish Western economies are China's main customers.

The West has stopped spending - and looks set to have subdued spending for several more years. China has a lot of overcapacity and zombie companies which isn't going to help their demand for raw materials - therefore raw materials prices are likely to flatline or drift lower, unless QEternity kicks off hyperinflation in a few years time.

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